Trade importers recently encountered common problems, when importing from China. The orders were canceled or the factory delayed shipment. Usually, the response is China’s large-scale power cuts. Do you know what’s the reason?
According to media reports, China began large-scale power rationing. Many provinces have been affected, such as Shandong, Jiangsu, Zhejiang, Guangdong, and Yunnan. For modern life, power failure means the complete cessation of production and life. But I want to say, things are not complex.
The first reason, a sudden increase in production capacity.
Under the influence of viruses, Chinese factories are still producing, attracting a large number of international orders. Now let’s see two graphs. From April 2020 to March 2021, China’s monthly power generation is in a stage of rapid growth.
China’s power generation hit a record high this year, but it is far below demand.
Second, coal prices are still high.
Faced with strong demand, the supply of electricity cannot keep up. The main reason is the rapid increase in coal prices. This picture shows the trend of China’s coal price. Unfortunately, this year’s power generation is indeed more expensive than previous years. In June 2021, coal prices even rose to US$217.
High costs make power companies lack the power to expand power generation. In this case, China needs to protect the interests of more residents through power outages. This is a typical phenomenon in economics. And we believe that this situation should pass soon.
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